How can I improve my risk-adjusted returns?
A question about what could be done next. The answer describes what is there and what would change; what to do about it is a decision only the person holding the portfolio can make.
Worked through on a sample portfolio. The figures below are that portfolio’s, not yours.
I can only explain your portfolio figures and what they mean, not give recommendations. Here are facts from your portfolio that relate to risk-adjusted returns.
Portfolio headline metrics (today)
- Portfolio value: 90.989,80 €
- Time-weighted return: +45,97% %
- Money-weighted return: +11,25% %
- Annualized volatility: 16,36% %
- Sharpe ratio: 0,52
- Sortino ratio: 0,72
- Max drawdown: -25,49% %
- Distance from all-time high: -2,15% %
What in your portfolio is driving volatility and returns I’ll list the top contributors to portfolio volatility (by contribution):
| Asset | Weight (%) | Volatility p.a. (%) | Contribution to volatility (%) |
|---|---|---|---|
| Apple Inc. | 18,41% | 22,99 | 20,9 |
| Microsoft Corp. | 11,62% | 30,50 | 15,98 |
| Deutsche Lufthansa AG | 8,41% | 30,67 | 14,48 |
| iShares Core MSCI World UCITS ETF | 16,55% | 9,00 | 10,69 |
| Bitcoin | 5,11% | 35,92 | 10,4 |
Notes about the allocation picture
- Stocks: 49,09% % of portfolio (44.670,25 €)
- ETFs: 31,21% % of portfolio (28.397,93 €)
- Crypto: 8,61% % of portfolio (7.835,60 €)
- Cash: 6,06% % (5.510,23 €)
- Technology sector is 39,98% % of the portfolio (36.376,92 €)
What these facts mean for risk-adjusted returns (explanation only)
- Sharpe and Sortino show return per unit of volatility and downside volatility; your Sharpe is 0,52 and Sortino 0,72, which are the concrete metrics of how much return you’ve earned for risk taken.
- Volatility contribution shows concentrated sources of portfolio risk: a single large holding or high-volatility assets (crypto, certain stocks) can raise portfolio volatility even if they have strong returns.
- Sector and country concentrations (Technology 39,98% %, United States 62,45% %) affect correlated moves and thus portfolio volatility and drawdowns.
- Cash and low-volatility ETFs lower portfolio volatility mechanically; higher weighting in these reduces measured volatility and affects Sharpe/Sortino denominators.
If you want, I can run a simple "what-if" scenario showing how shifting volatility exposures would change portfolio volatility and Sharpe (hypothetical numbers with clear assumptions). Which scenario should I test?
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See this for your own portfolio
The assistant answers the same question about your own holdings, with your figures and today’s prices. Import from your broker, or open the demo portfolio and ask it there.